Four Steps to Help Widows Rebuild Financial Stability

An older woman clutches a photo to her chest while lying on the sofa and looking out the window.

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published 6 June 2024

The loss of a spouse is one of the most challenging experiences anyone can face, especially when it brings new financial responsibilities. When a spouse who handled all financial decisions passes away, the surviving partner may find herself at a loss, not knowing how to access funds, pay bills or manage investments. This sudden shift can add a significant emotional and logistical burden during an already complex grieving process.

Take the case of Tanya, who felt woefully unprepared as she found herself managing finances for the first time after her husband's passing. Tanya's world shattered the day her husband, Mark, passed away. They had been married for 20 years, and Mark had always taken care of their finances. Tanya, a talented artist, had focused on her passion for painting and raising their two children, Mia and Jake. Mark's sudden death left her not only heartbroken but also overwhelmed by the financial responsibilities she had never faced before.

Tanya is not alone. A troubling statistic from UBS reveals that only 20% of women participate equally in their household's long-term financial decisions during their marriages. This lack of involvement leaves many widows vulnerable when they must take over their financial destinies suddenly.

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“Heterosexual couples who fail to include the female spouse in financial decision-making ultimately put her at great risk of being ill-equipped to handle the financial responsibilities upon the death of her spouse,” says Natalie Colley, CFP®, CDFA®, senior lead adviser at Francis Financial, a financial advisory firm known for empowering widows to confidently navigate their finances. “Given that statistics indicate men are more likely to pass away first, it’s crucial for women to be prepared to take the financial lead when the time comes.”

Reduced financial literacy

Women not involved in financial decision-making are often lacking in financial literacy. This can lead to challenges in making informed decisions regarding investments, savings, retirement planning and understanding credit, savings and investing.

This was true of Tanya as well. In the weeks following Mark's passing, Tanya felt lost in a maze of bills, bank statements and insurance policies. She remembered the times Mark would sit at their kitchen table, surrounded by documents, meticulously going over their finances. She had always admired his ability to manage their money but had never thought she would need to step into his shoes.

Costly mistakes

Some women refrain from engaging in their finances, completely, after their spouse dies, Colley says. “Financial anxiety can be so overwhelming that women prefer to avoid financial matters entirely, rather than confronting their financial reality. The irony is that educating yourself about the details of your financial situation is a crucial step towards alleviating financial anxiety.”

Tanya is also a good example of this. As she sifted through a pile of unopened mail after Mark died, she stumbled upon a letter from their mortgage company. Panic set in as she realized she had missed a payment. Her heart raced, and tears welled up in her eyes. The missed payments resulted in late fees and penalties, which added unnecessary strain to her already tight budget.

In addition to making costly financial mistakes by not actively participating in financial decision-making, women miss out on opportunities to invest and grow their wealth. According to Colley, “For some widows, their life insurance proceeds remind them of their loss. Some find it easier to just leave this money in cash. Others ‘forget’ to consolidate and roll over retirement accounts. However, with the right guidance and support from a fiduciary financial adviser, these opportunities can be seized, leading to a brighter financial future.”

Increased vulnerability in widowhood

Scams and financial abuse targeting widows are common and vastly underreported. In the midst of her grief and confusion after Mark's passing, Tanya became one of these financial abuse statistics. A close family member spun a convincing story about a business venture that needed immediate funding. He promised Tanya that it would yield high returns, which could help secure her financial future.

Trusting his intentions and not wanting to disappoint a family member, she decided to lend him a significant portion of her savings. He missed numerous repayment deadlines and when Tanya finally pressed for details, his story began to unravel. It became clear that his business venture was not as promising as he had made it out to be, and there was no money for repayment. Tanya felt a mix of anger, betrayal and embarrassment when she realized she had been taken advantage of,

Experts agree that the best defense against being victimized this way is having a solid understanding of your finances and the risks that you can afford and not afford to take.

Steps to rebuild financial stability

To avoid the problems Tanya encountered and set yourself up for a secure future, here are four steps for widows to take:

1. Assess your income. It’s important to understand all your potential income sources, such as Social Security, pensions and any benefits available from the Veterans Administration when applicable. This knowledge forms the bedrock of financial planning post-loss.

2. Manage your expenses. Effective expense management is crucial. Tools like GoodBudget and YNAB (You Need a Budget) can help track spending and create a budget tailored to new financial circumstances.

3. Invest for the future. Colley advises against the high risks of owning individual stocks and recommends diversified investments through mutual funds and ETFs. These instruments provide exposure to a broad market segment, reducing risk and requiring less active management.

4. Create a support network. The importance of a robust support system cannot be overstated. Widows must assemble a team that includes a financial adviser, an estate planning attorney and a therapist specializing in grief counseling. Jill Cohen, a nationally recognized grief counselor, believes that no one should ever grieve alone. Cohen shares, “Everyone should have a safe place in their grieving and healing process and have a safe haven in which to feel feelings, share stories, ask questions, seek advice and learn how to cope, slowly but surely.”

This team approach not only helps address the financial, emotional and legal aspects of rebuilding one's life but also provides a sense of reassurance and companionship, making the journey less daunting.

A resource for the journey

To further aid widows in their financial journey, I wrote Financial Help for Widows: A Complete Resource Guide. This comprehensive guide covers everything from essential budget management to complex investment strategies. It acts as a road map, empowering widows to confidently navigate their finances. The guide can be downloaded at www.francisfinancial.com.

With the proper support and information, widows can turn a period of uncertainty into empowerment and financial security, ensuring they survive and thrive independently. This approach changes individual lives and can shift traditional financial planning paradigms to include and support more women in their time of need.

Tanya's journey was fraught with challenges, but each setback made her more resilient and knowledgeable. She became an advocate for financial literacy within her family and community, sharing her experiences to help others avoid similar pitfalls. Tanya's story serves as a reminder that widows can — and must — take control of their lives, especially when it comes to financial matters.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Stacy is a nationally recognized financial expert and the President and CEO of Francis Financial Inc., which she founded over 20 years ago. She is a Certified Financial Planner® (CFP®), Certified Divorce Financial Analyst® (CDFA®), as well as a Certified Estate and Trust Specialist (CES™), who provides advice to women going through transitions, such as divorce, widowhood and sudden wealth. She is also the founder of Savvy Ladies™, a nonprofit that has provided free personal finance education and resources to over 25,000 women.